Why Low Cost Auto Insurance Isn’t Always Great
For most people, price is the most important factor in determining what insurance they want, but there are multiple reasons why low-cost auto insurance isn't always great. When you purchase the minimum required auto insurance, you're leaving out very important policies such as collision or comprehensive insurance, which can help greatly when you're involved in a crash, or when your car is the victim of vandalism or theft. Many states require that drivers have a minimum of $10,000 in bodily injury liability coverage, which is the insurance policy that pays out to cover the other driver's injury and medical treatment costs stemming from an accident that you caused. If you have just the minimum required $10,000 in coverage but it cost $45,000 to treat the injuries you caused the other driver, you will end up paying the $35,000 difference out of your own pocket. It is important to buy car insurance with the best value in relation to your particular situation rather than the cheapest overall price.
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UPDATED: May 3, 2021
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Are you one of those people who got the bare minimum car insurance coverage just so they could save a few bucks? We don’t blame you – auto insurance can be expensive! Depending on where you live, what kind of car you own and various other factors, you could end up paying thousands per year for just the minimum legally-required coverage in your state.
Since auto insurance provides somewhat intangible benefits, it may seem like a good place to save a few dollars in your budget. However, if you end up causing an accident and you skimped on your car insurance, you could end up paying far more in out-of-pocket expenses than if you had just purchased adequate coverage in the first place. Below we’ll take a look at a four of the reasons why low cost auto insurance isn’t always a great deal.
Low Cost Auto Insurance Means Low Levels of Protection
A conversation with an auto insurance agent can seem like insurance involves upsell after upsell; while this is true to some extent, it’s important to realize that being fully protected by auto insurance means investing in a range of different policies that all work together. When you purchase the minimum required auto insurance, you’re leaving out very important policies such as collision or comprehensive insurance, which can help greatly when you’re involved in a crash, or when your car is the victim of vandalism or theft.
There are also many different auto insurance policies that involve you and your passengers, including your friends and family members. While just a handful of states legally require drivers to protect themselves with some form of insurance that covers crash-related medical treatment costs, these policies are incredibly useful and can save you having to pay huge fees for a hospital stay, or to treat a serious injury.
CNN.com said it best –
What your insurance covers is just as important as, and sometimes more important than, what you pay up front. Ultimately, the cheapest plan is the one with the best price for the benefits you’re most likely to use.
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Increased Liability with Low Cost Auto Insurance
Every state has some form of minimum requirements in regards to auto insurance policies and how much liability coverageyou must carry. When you purchase your auto insurance, the minimum required coverage in bodily injury liability, property damage liability, personal injury protection and possibly uninsured motorist protection will be explained and you will need to meet these minimums to be considered ‘insured’ by your state.
The challenge here is that while the state mandates these coverage minimums, they are almost always very far from what is actually required when you cause a crash. For instance, many states require that drivers have a minimum of $10,000 in bodily injury liability coverage, which is the insurance policy that pays out to cover the other driver’s injury and medical treatment costs stemming from an accident that you caused. If you have just the minimum required $10,000 in coverage but it cost $45,000 to treat the injuries you caused the other driver, you will end up paying the $35,000 difference out of your own pocket. Clearly, it’s worth it to purchase realistic amounts of auto insurance coverage so make sure that all of your numbers sound correct when you’re buying insurance.
Low Cost Auto Insurance and High Deductibles
It’s almost a rule with auto insurance companies: the lower the cost of your auto insurance, the higher your deductible will be. If you’re not familiar with deductibles, this is the amount that you will be required to pay first, before your auto insurance coverage kicks in to cover the rest.
If you are driving and a rock damages your windshield, it will likely be covered under a comprehensive auto insurance policy – but you’re still going to face the deductible. If you purchased the cheapest comprehensive policy you could find, the deductible may be something like $500. This means that you’ll pay the first $500 for the windshield repair, and the insurance company will pick up the remainder. However, if you had a comprehensive policy that was perhaps $50 more per year, the deductible may be less than half of that, or nothing at all.
Picking the right combination of auto insurance policies does involve a bit of guesswork, but erring on the side of caution will always pay off in the long run.
Skip Low Cost Auto Insurance and Aim for Discounts
Instead of looking at your auto insurance bill and trying to make savings by cutting your coverage, aim to extract the maximum possible amount in discounts available from your insurance provider. All insurance companies offer discounts to their customers, and with an hour spent on the phone or in person with your auto insurance agent, you may find out that you qualify for some of these. If you don’t currently qualify for discounts with your insurance company, check and see how long it will take until you do. If another insurance company has discounts that you can make use of today, it may be worth switching your auto insurance to this provider and reaping the additional savings.
There are few products like insurance, where you purchase it hoping you never need to use it. If the day comes when you need to rely on your auto insurance to help cover injury, property damage and other crash-related costs, you will be happy that you splurged and got the best coverage you could afford. Avoid skimping on your auto insurance – it may come back to haunt you later!
Additional Resources To Look At Regarding This Topic
- Esurance – Why Cheap Car Insurance Isn’t Always the Best Car Insurance
- Allstate – When The Cheapest Car Insurance Isn’t The Best Choice